The great colonial city of Oaxaca was brought to a standstill yesterday amid escalating tension that has already transformed much of this tourist attraction into a place of burning barricades, popular justice, shadowy paramilitary groups, and shoot-outs outside luxury hotels.

Shops, petrol stations, hotels and restaurants stayed shut as part of a 48-hour strike seeking to pressure the federal government to intervene between radical leftwing groups and the local state governor they want to overthrow.

What began in May as a dispute about teachers' pay has grown into a revolt with human rights activists fearing a bloody repression.

The Popular Assembly of the People of Oaxaca, the APPO, controls much of the city centre known the world over for its plazas and monasteries, laidback cafes and picturesque markets filled with indigenous people selling their textiles.

This is now APPO territory filled with tents, daubed with revolutionary graffiti, dotted with burnt out buses and protected by roadblocks. The protesters have also taken over local government offices and radio stations, as well as tying alleged thieves to lamp-posts.

The APPO says the protest will continue until Governor Ulises Ruíz, who they accuse of everything from corruption to authoritarianism, is ousted.

Forced into hiding most of the time, the governor has refused to resign. His botched attempt at a crackdown in June only radicalised the movement. More recently, gunmen suspected of being off-duty local policemen have shot at protesters, killing two. A few days ago rumours that the governor was being interviewed inside the luxury Camino Real hotel prompted protesters to storm the building. The chaotic incident ended amid gunfire from unclear sources.

The announcement of this week's business strike triggered long queues as residents stocked up on supplies. It also increased fears among protesters that a full scale attempt to repress their movement is imminent. Declaring "maximum alert" they reinforced their barricades and readied piles of Molotov cocktails. Until now the federal government has appeared reluctant to get involved, with officials also playing down the impact on tourists.

Tourists have begun avoiding Oaxaca and the British embassy was advising visitors to "carefully consider the risks of travelling to the city at this time".

The government is under pressure to act not only from the local private sector but also from other governors who fear similar pressure in their own states if the Oaxaca radicals manage to oust Governor Ruíz. President Vicente Fox has also promised to resolve the problem before the president elect, Felipe Calderón, of the ruling National Action Party, takes office on December 1.